Search underway for directors to run TRUenergy

Hong Kong’s CLP Group is working with recruitment firm Heidrick & Struggles to assemble a board of directors for TRUenergy as the company prepares for its $4 billion Australian sell-down.

CLP is expected to have at least two representatives on the board of the company slated for a listing in the second half of this year but finding senior Australians with a combination of power industry and listed company experience is likely to be a challenge.

Rod Eddington
, who has served as a director of CLP since 2006, is believed to have already ruled himself out of the race to become a director of TRUenergy. Sir Rod has a reasonably full corporate dance card, combining his role as head of the Labor government’s infrastructure advisory board, Infrastructure Australia, with the chairmanship of JPMorgan in Australia and New Zealand as well as board positions at News Corporation and Lion Nathan.

A source close to the company said that TRUenergy would be assembling a board comparable with other listed utility companies and with a broad mix of skills. Finding senior Australians with a combination of power industry and listed company experience is not straightforward because of the long history of state and foreign ownership in the sector.

But as well as power industry input from CLP representatives on the board, local recruits from allied and comparable industries to the power sector are likely to be tapped. The company is also aware of the need for broad skills at the top to sell a large new listing to investors.

TRUenergy managing director
Richard McIndoe
is set to continue in his position at the newly listed entity.

The float of TRUenergy would be the biggest in Australia since QR National’s $6.2 billion listing in 2010.

Market volatility is expected to continue this year and investors are likely to remain picky about new offerings, so timing is the critical factor in planning. Experts do not expect float conditions to recover in the first half of this year and TRUenergy is likely to wait until the fourth quarter to list.

Related Quotes

Company Profile

CLP now views TRUenergy as having reached critical mass and ready for listing alongside peers like Origin. TRUenergy in 2010 paid $2 billion for the Energy Australia retail business and the rights to trade the power output of the Delta West generating stations. CLP wants to cash in some of its Australian power businesses to fund power generation investments in Hong Kong and elsewhere in Asia.

RBS analyst Jenny Cosgrove estimates that the Australian arm of CLP Group is worth $7.9 billion, saying a sale of 49 per cent of TRUenergy would give CLP net $2.8 billion in cash. Ms Cosgrove said that the NSW assets made TRUenergy “IPO ready", as an integrated power operation with a large retail customer base in NSW and Victoria that it could hedge with its own generator capacity. Its capacity and other hedges are is the equivalent of 82 per cent of its customer base, which is the strongest such match in the industry.

There is also a strong upside to come for TRUenergy when depressed wholesale power prices recover in the next four to five years “and which would still be on the table for IPO investors", she said.

TRUenergy appointed Rothschild Australia as an adviser on the float last year. It is expected to hire more advisers including Morgan Stanley over the next few months.

The company is well placed to deal with industry changes brought by the carbon tax. One quarter of TRUenegy’s power output is fired by dirty brown coal at the Yallourn power station in Victoria and the company has already had to take a $245 million impairment on the value of the plant because of the tax cost. But industry analysts say that fast rising gas prices in eastern Australia, pushed up as more gas is exported in lucrative liquefied form, will keep coal competitive as a fuel for longer than expected despite carbon tax costs.

Moreover, the company has approval permits to build 1000 megawatts of gas-fired output at Yallourn, so that it could in effect convert two thirds of Yallourn’s output to gas if needed. TRUenergy also has a strong portfolio of planned gas-fired generator projects in NSW and Queensland, of the type that are likely to be in most demand in future.